# Expected growth rate of a stock

IBM just paid (t=0) a $2.00 dividend. The required rate of return for IBM stock is 22%. If a price of a share of IBM is expected to be $82.1516 at the end of year 2 (t=2), what is IBM's expected growth rate?

possible answers:

a)16% b)11% c)11.5% d)18% e)10.5%

f)14.5% g)16.5% h)12% i)22.5% j)13.5%

https://brainmass.com/business/finance/expected-growth-rate-stock-28629

#### Solution Preview

Answer: d)18%

D0 = $2.00

D1 = 2(1+g)

D2 = 2(1+g)^2

D3 = 2(1+g)^3

P2= ...

#### Solution Summary

The solution calculates expected growth rate of a stock given required rate of return, price and dividendusing dividend discount model.

$2.49